Closed Loop produces more than 80% of the recycled plastic used in UK milk bottles but its chief exectuve says administration is ‘inevitable’ without government support.
Photograph: Alamy

Britain’s biggest recycler of plastic milk bottles is facing possible collapse after being squeezed between a slump in global oil prices and a supermarket price war.

Closed Loop Recycling, based in Dagenham, could be forced to call in administrators within days because clients have cut back on buying recycled plastic.

The company, which produces more than 80% of recycled plastic used in the UK’s milk bottles, matches its prices closely to the cost of virgin plastic in order to attract and retain customers. But the prices that can be achieved for recycled material has fallen nearly 40% in the past nine months as the oil price has dropped.

The slump in global oil prices has already caused the collapse of at least two other recycling firms in the past four months as the price of reprocessed plastic in the open market has become between £300 and £500 per tonne more expensive than virgin plastic.

Chris Dow, chief executive of Closed Loop, said the company was in urgent need of financial support: “Our customers want to buy recycled plastic but they don’t want to pay more [than virgin plastic]. Without the support of the industry or the government it is inevitable we will go into administration.”

Closed Loop says it would cost just 0.1p per two-pint plastic milk bottle to secure the future of the company.

The collapse of Closed Loop, which reprocesses used plastic milk bottles into granules that are then turned into new bottles, would be a major blow to a government-backed scheme intended to create a “circular economy” that reuses resources in Britain rather than creating waste.

“We are the collateral damage from the drop in the oil price,” said Dow.

Under the successful Dairy Roadmap scheme – which major retailers including Asda, Tesco and Morrisons and processors including Arla and Dairy Crest have all signed up to support – nearly 30% of the plastic used in milk containers is now recycled. The voluntary agreement has a target of achieving 30% this year and 50% recycled plastic by 2020.

Resource minister Dan Rogerson has held at least two emergency meetings with retailers, dairies and packaging firms to try and muster industry backing for Closed Loop, which has yet to make a profit.

But Dow says he has struggled for months to garner industry support because milk has become a key battleground in the price war being fought between major supermarkets. Every fraction of a penny in the supply chain is key.

Marcus Gover, ofthe government-backed Waste Resources Action Programme, said the industry needed to agree on a new way to price recycled plastic quickly. “If we can agree something then maybe we can save this company,” he said.

He said the industry needed to recognise that buying virgin high-density polyethylene, the type used in milk bottles, might offer a short-term saving but could leave the industry more vulnerable in future.

“Commodity prices go up and down. Recycled food-grade [plastic] will be a good buy again. But if we don’t stick with it now, there won’t be any to buy in the UK and that would be a real loss for us all.”